This is the second article in a series about Groupon coupons for restaurants. The first article covered accounting for Groupon transactions. This piece covers how to set up your Point of Sale (POS) system to record redemptions of coupons. Failing to do so properly could result in the restaurant being on the hook for a lot of sales tax, penalties and interest!
In the first article, we learned that HST applies to the “promotional value” of the Groupon coupon. In our example, the coupon was worth $100 of meals, and the customer purchased it for $50, which was paid directly to Groupon. The promotional value of the coupon is the $50, even though the restaurant does not receive this amount from Groupon. So, when the customer orders $100 worth of meals and drinks at a restaurant, she will have to pay tax on $50, but she will receive a credit for $100 (face value of the coupon).
Restaurants that use Groupon (or other similar programs) may need to update their POS systems to properly account for these transactions. Many POS systems can be easily modified by the user to make these changes, but some require programming by the developer (which can take time). Here are the changes you will need.
In our example, we will need a discount key to deduct $50 from the customer’s bill, before tax. This reduces the bill from $100 to $50. Note that this reduces the customer’s bill to the amount that he or she paid for the coupon. Now, the POS system will calculate sales tax(es) in the usual manner. In Ontario’s case, the POS system will add $6.50 (13% HST) to the bill, leaving a balance of $56.50. You may need to have another key that allows a dollar amount discount, determined at the time of sale, too. This is because some customers won’t spend the full amount they are entitled to on the coupon. For example, if a customer spent only $80 and redeemed the coupon, the discount to be applied would only be $30.
Groupon Coupon Payment
Now, we need to account for the other $50 that the coupon holder is owed. The easiest way to do this is to create a Groupon (or Coupon) payment type. Again, this may require programming, but many systems allow to you easily create this within the software. Using a payment type, the customer’s bill will reflect a $50 reduction of the balance due. Note that there is no tax reduction, just like there is no tax reduction when restaurants receive cash, Visa, MC, etc…
You may need to update your day end summary reports to ensure that they pick up these new types of transactions (discount and payment type). Also, you should make sure that you have the ability to create a report that shows Groupon discounts apart from other discounts.
It is useful to have the ability to print a report showing all Groupon redemptions (payment type), so that you can check it to the certificates that were initially issued.
The POS system only gets you part of the way to controlling and properly reporting your Groupon transactions. You will also need to adjust your internal controls. Specifically, you will need to create a policy about expired coupons. Many restaurants simply refuse to accept any coupons that have expired. In the case of Groupon coupons that is probably the best policy, because there is very little chance that these customers will ever return without a coupon. Many restaurants will honour coupons and certificates that they have given to VIP customers or those that received the certificates at charity auctions, because these truly are good customers or potentially good customers.
Servers need to check for expired Groupon coupons every time they are redeemed. You need to ensure that duplicated coupons are not accepted. Servers need to be properly trained on how to enter discounts and Groupon payment types.
As we will see in a forthcoming article about tax implications of Groupon certificates, it is imperative that the restaurant keep all guest checks paid with Groupon certificates.
You need to make sure that your Groupon transactions are recorded in the accounts accurately, based on the concepts outlined in the first article. I’ll be showing you how to do this in QuickBooks in a future article, too.